HERMITAGE — Hermitage Municipal Authority approved an agreement with the state Wednesday that would allow new connections to the sanitary sewer system, extend the timeline for completing a sewer plant expansion and result in a new discharge permit.

City commissioners must approve the agreement and are expected to vote on it later this month, and then state officials must sign it, said City Manager Gary P. Hinkson.

“This should resolve all outstanding issues with DEP,” Hinkson said, referring to the state Department of Environmental Protection.

“Hermitage has been responsible and responsive in working with DEP to resolve sewage-related issues,” said agency spokeswoman Freda Tarbell. “Hermitage sets a positive example for other communities to emulate.”

The city has been working under a consent order since 2003 to address the release of untreated sewage from the plant on Broadway Avenue into Bobby Run, which flows into the Shenango River. Under that plan, the city has undertaken numerous projects to extend and replace sewer lines, expand the plant and adopt and update ordinances.

DEP banned most sewer connections in August to address the expiration of the city’s discharge permit and word from the city that a second plant expansion could not be completed by the end of 2010 — a date set in the first consent order.

While an official said the state considers the permit and plant expansion to be separate issues, both are covered by the new consent order.

The agreement gives the city until Dec. 31, 2012, to expand the plant. The expansion will include switching from a chlorine-based treatment process to ultraviolet light, and the building of an anaerobic digester to “cook” raw sludge and food waste into a safe sludge that can be handled and used as fertilizer and fill.

“That was our date,” Hinkson said of meeting the new deadline. “We proposed that date to them. We better get it done.”

On the permit side, state officials said the plant was handling too much organic material, and had allowed treatment bypasses on four occasions.

City officials did not agree with DEP’s findings. They said the city had received permission years ago to handle more organic material, the bypasses were allowed under the previous consent order, and they were not true bypasses because the water had been treated with chlorine before being discharged.

However, city officials also agreed not to fight DEP on the issue, and accepted its conclusions. Under the order, the city will pay a $11,200 penalty for the four bypasses.

The city’s permit will show the increased capability to handle organic material, and bypasses “will not be an issue going forward,” Hinkson said.

The city has been working under a year-to-year allocation of equivalent dwelling units — one EDU is essentially the average discharge from a house — in determining connections to the system. DEP has allowed 125 EDUs a year and the city has never used all its allocations in one year.

Under the new order, the city will receive 250 EDUs for use through March 31, 2011, with some provisions — with prior DEP approval — to exceed that cap to connect homes with failing on-lot systems or for revitalization projects.

After March 31, 2011, DEP will consider a request for more EDUs.

The ban has affected only a few single-family home building projects, Hinkson said. He added that some people might have pursued plans because they knew of the ban, which also covers the parts of Clark, Wheatland and South Pymatuning and Shenango townships that send waste to Hermitage for treatment.

City officials wanted to get the issues resolved as quickly as possible, but also to get a fair deal, Hinkson said.

“I think we achieved an appropriate balance of getting this done as quickly as we could and taking time to do it right,” he said.

DEP officials were responsive to city questions and concerns, he added.

Once the consent order has been signed by the city and the state, a new discharge permit will be issued.

Completion of the agreement allows city officials to focus on the plant expansion, which is estimated to cost $30 million. The engineering firm of Herbert, Rowland and Grubic, which has a Hermitage office, has started designing the expansion, and Hinkson said officials are hoping a state low-interest loan and grants will reduce the amount of money the city must borrow through a bond issue.

Whatever the funding scheme, sewer fees will be going up. Hinkson said commissioners want to set a fee schedule as quickly as they can so the increase can be phased in over three years, as was done with the last increase.

“There’s a lot of work ahead here,” Hinkson said.